The following CVP income statements are available for Old Company and New Company:

Instructions
(a) Calculate the break-even point in dollars and the margin of safety ratio for each company.
(b) Calculate the degree of operating leverage for each company and interpret your results.
(c) Assuming that sales revenue increases by 20%, prepare a variable cost income statement for each company.
(d) Assuming that sales revenue decreases by 20%, prepare a variable cost income statement for each company.
(e) Discuss how the cost structure of these two companies affects their operating leverage and profitability.